Why Chinese Authorities Have Cracked Down On Indian Diamond Traders’ Offices In Hong Kong

Indian diamond traders in Surat and Mumbai are concerned over raids carried out by Chinese authorities in Hong Kong following the arrest of a Chinese couple.

The Indian Express quoting Gem and Jewellery Export Promotion Council (GJEPC) sources in Surat said a Gujarati diamond merchant had been detained for questioning by the Chinese authorities before being let off on Tuesday night (1 September).

The merchant was detained following the arrest of the Chinese couple, working at a courier firm, last month.

The two were arrested as they failed to provide the proof of paying import duty for 150 packets of diamonds in their possession. They were allegedly trying to smuggle it to Shenzhen in mainland China from Hong Kong State Administered Region.

The couple also had a diary with them containing names and details of those who had given the diamonds and those to whom the consignments had to be delivered.

Based on the details in the diary, some 120 Chinese have been detained for questioning. They have all been taken to Shenzhen.

China is concerned over smuggling of diamonds to the mainland from Hong Kong. Diamond entering the mainland attract a 10 per cent import duty.

In order to dodge the payment of the duty, the precious stones are allegedly being smuggled from Hong Kong to other parts of China.

The GJEPC has now approached the Centre seeking the intervention of the embassy in Hong Kong to help the diamond traders.

Indian diamond merchants who process diamonds in Surat have trading offices in Hong Kong, a free trade zone allowing the precious stones import at zero customs duty.

The firms allegedly hire local Chinese couriers to send the diamonds in parcels to places such as Shenzhen, Guangzhou and Shanghai.

The Chinese began monitoring Indian diamond trading movements since last month to stop such smuggling. Yesterday (2 September), the authorities began search operations at diamond trading firms and jewellery outlets in some parts of China, including Shenzhen and Shanghai.

There could be a couple of reasons why China has begun to crack down on the Indian diamond trade. The first reason is because of the standoff between the Indian Army and the Chinese army at the border near Ladakh.

The second is the slew of steps taken by India for China’s aggression at the border. India has banned over 150 Chinese apps such as TikTok, PUBG etc.

India is also reported to be mulling other measures to hit China economically but so far the threat has not been carried out.

The current episode has brought back memories of January 2010 when 22 Gujarat diamond merchants were arrested by Chinese customs authorities on charges of not paying customs duties. They were charged with smuggling polished diamonds to the tune of over $7 million.

Then prime minister Manmohan Singh and Gujarat chief minister Narendra Modi, now Indian Prime Minister, helped to bring back 13 of them to India. The remaining were jailed for periods ranging from six months to six years.

Diamond shopping in Hong Kong is considered a great experience, particularly on Nathan Road in Kowloon. The place is packed with jewellers and the business there rivals activities at New York City’s Diamond District.

One reason why Indian diamond merchants have trading offices in Hong Kong is because diamonds fetch good prices there.